A Study on the Impact of Corporate Social Responsibility on Organizations Level of Profitability

Abstract

Investigations were done over a long period to see whether or not there is a correlation between Corporate Social Responsibility (CSR) and organization profitability. The major reason for disparity is due to the complexity in measuring CSR. Scholars later found out that Correlation co-efficient can be used to measure this. Main objective is to find out whether there is a correlation between the two variables or not within the hospitality industry. The data is taken from the financial statements of John Keells PLC (JKH), the selected firm for this study that comprises of two city hotels and nine holiday resorts. Due to the qualitative nature of CSR, it is taken as a percentage on other operating expenses, as CSR is a part of it under JKH. Measuring profitability is done by four ratios; Net profit margin, Operating profit margin, Return on Assets (ROA) and Return on Capital Employed (ROCE). The calculation showed a negative correlation between three of the indicators and CSR and a positive correlation between ROA and CSR, marking an overall negative correlation between CSR and profitability. Note that the even though most of the researches done relevant to this topic have given out a positive result, it could have a negative result too as CSR is a concept that generates results in the long run thereby reaching sustainability.